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India finally wakes up to transshipment potential

Anil Sasi

Indian ports are missing out on one of the most promising areas in the international maritime business-cargo transshipment.

Antiquated customs procedures, lack of requisite draft and support infrastructure combined with low operational efficiency at domestic ports are driving away mainline vessels to neighbouring international hub-ports like Colombo and Singapore.

Transshipment occurs when mainline vessels do not come straight to the port of destination for loading or discharging cargo, but instead dock at regional hub-ports from where smaller feeder vessels ferry cargo to the specific ports.

Over the past decade, increasing volumes of export and import cargo from India, Pakistan and Bangladesh are transshipped to all parts of the world via Colombo, Singapore and Dubai. Leading global carriers have stopped calling at Indian ports, instead preferring to lift cargo at these transshipment centres to save on cost and time, which translates into a clear loss of business for our ports.

Waking up to the reality of foreign ports usurping business of India's ports, the government is presently working on a proposal to convert two existing major ports-JNPT on the west coast and Chennai on the east coast-- into transshipment centres to attract some of the business now going to foreign ports.

In another initiative, the ministry of shipping has constituted a committee headed by the chairman of JNPT with representation from the commerce ministry, shippers and port trust officials for formulating policies on transshipment. The committee is expected to submit its recommendations by October 31.

However, there are some distinct physical, financial and procedural pre-requisites for a hub-port. Physical factors include suitable geographical location, deep draft channels and berths and support infrastructure at ports.

Financial facilitators include levy of economical port tariffs, which are presently amongst the highest in Indian ports. Streamlining of customs procedures and other formalities are the other important requirements, an expert on ports said.

Colombo and Singapore's geographical advantage is that they lie on international maritime routes, while for mainline vessels to call at Indian ports a diversion of around two days from the main course is necessary, which affects profitability of shipping companies.

To counter this disadvantage and successfully develop its own hub-ports, India needs to rationalise the high tariffs being levied at domestic major ports, a shipping official said.

Even though the customs department has started rationalisation and streamlining of procedures, there is need for further simplification of procedures to enable transshipment to take place at the Indian hub ports, a ministry of shipping official said.

For example, exporters using Indian feeder ports are paid duty drawback only after a delay of 4-6 weeks, whereas it is paid immediately at Dubai and Singapore.

"Exporters would naturally prefer to route their cargo through these places, than use domestic ports," an official said.

The increasing trend towards containerisation of cargo and deployment of sixth generation container vessels by shipping companies (with capacity to carry over 6000 TEUs) has widened the scope of transshipment.

As big mainline vessels now carry cargo bound for different destinations at a time, they can hardly afford to wait at a single port for days for discharge of cargo and necessary paperwork, a shipper said.

Further, delay in vessel turn-around time due to operational inefficiency at Indian ports translates into increase in costs. For instance, at Colombo a discharged container takes less than half a day for loading into feeder vessels whereas at Indian ports it may lie at the terminal for days due to complex procedural formalities, they said.

"Ships have to pay waiting charges ranging between $15,000 and $20,000 a day. These charges when added to the cost of export goods also make the domestic goods uncompetitive in the international market," a shipping company official said.

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